Insurance Blog

Why should I get insured ?

The question that arises, when anyone hears the word “INSURANCE” or “POLICY” is “Why should I take insurance?”. This article is an introduction to series of blogs which will educate an insurance naive. The next articles will focus up on suitable plans for appropriate age groups.

Insurance is unlike, any other financial instrument that provides short term returns. Many people compare insurance as their investment option. The comparison finally leads to loss of insurance and wining of Mutual funds in this unequal chase.  This comparison is like a running race between fish and a fox, which is completely irrelevant.

Insurance is a financial instrument that safeguards the financial interests of the family in the absence of the sole bread winner. People consider insurance as unnecessary money sucker as they are unaware of the benefits or they are mis-educated about the products. This stereo typing happened due to term plans, which won’t return any benefits if policyholder survives.

Scenario in insurance market has changed with the entry of endowment plans, which will provide maturity benefits if the policyholder survives. These policies paved path for many hybrid policies, which were now being targeted based on the age groups and their requirement.

Insurance which was born with an aim of providing financial security is now equipped with an investment feature with new age structured policies. As they were basically targeted for insurance the returns provided on survival will be little less compared to investment options like MF’s, stocks and Bank FD’s. This is negated by the life cover that no other financial instrument is providing.

Considering insurance as an investment option is a right move for low risk profile individuals. Tax benefits provided under 80 ( C ) and 10(D) are unique to insurance, which will provide an edge over low risk financial products like Bank recurring deposits.

For people who are interested in taking risk were also accommodated in insurance segment with the help of ULIP’s (Unit Linked Investment Plans). These plans will allocated 1/8th of premium to insurance and rest in stock markets. Variety of funds were available for selection and can be chosen by policyholder himself. In case policyholder faces confusion, fund managers will guide based on their risk profile. Risk profile is being determined by giving questionnaire to customer. Funds are allocated based on customers preference and can be swapped if needed. This instrument gives an option to invest in insurance and stocks   at the same time.

Insurance has became a wholesome financial instrument, which can cater to the requirement of all segments of individuals. Besides reducing the risk of financial liability in case of risk, insurance also provides a chance to raise funds for future needs. These options make insurance a mandatory item in every individual’s portfolio.